Tesla Made $2.76 Billion From ZEV Credits In 2024 In US But Trump's Tax Bill Just Killed This Revenue Stream

President Donald Trump is set to sign the Big, Beautiful Bill into law on July 4. The bill effectively eliminates a crucial revenue stream for Elon Musk‘s EV giant Tesla Inc. TSLA, ZEV (Zero Emission Vehicle) credits.

Trump's tax bill passed the U.S. House of Representatives on Thursday, eliminating the $7,500 Federal EV credit on new purchases as well as a $4,000 credit on used EVs. The bill also axes hefty fines on the CAFE or Corporate Average Fuel Economy Norms.

CAFE and ZEV credits

CAFE norms dictate fuel economy for vehicles, regulating how far our vehicles must travel on a gallon of fuel. This is where Tesla comes in as the company exclusively sells all-electric vehicles. This helps the company generate vast amounts of regulatory credits known as ZEV credits or Zero Emission Vehicle credits that automakers earn for not generating emissions, by manufacturing either EVs or Hydrogen fuel cells.

Tesla can sell the credits to other auto manufacturers that have exceeded CAFE norms, which helps them offset the fuel economy standards and avoid paying hefty fines to the U.S. government. The EV giant generated upwards of $2.76 billion in revenue through the credits in 2024, according to a Carbon Credits report.

Revoking EPA Waivers

However, there is another aspect to it in the form of waivers for the Environmental Protection Agency, which helped enforce emissions norms. Influencer Sawyer Merritt shared a post on social media platform X, detailing the impact of the bill on EVs on Thursday.

"Congress recently used the Congressional Review Act to revoke EPA waivers that allowed California (and the 17+ states that follow its lead) to enforce stricter emissions rules, including ZEV mandates," he shared in the post.

The waivers served as crucial elements of the state-level ZEV credit rules, he suggests. Without these in place, "states can no longer require automakers to meet ZEV sales targets or buy ZEV credits," which effectively renders the sales of ZEV credits to be non-essential for companies in the U.S., Merritt says.

However, Tesla can still use ZEV credits as a revenue stream outside of the U.S.

A Silver lining?

Tesla sales have been down in recent times, with the company experiencing double-digit declines in markets like Sweden and Denmark, adding to the company's sales woes.

However, with Q2 deliveries exceeding market expectations and sales in China and the UK rising, there could be a silver lining for the company, even more so now, with Musk assuming oversight of sales in the U.S. and Europe.

Tesla has also confirmed that it will introduce affordable models in its lineup, though it remains unclear whether the models will be brand new or if they will be stripped-down versions of existing Tesla vehicles. These factors could help the company stabilize revenue streams in the absence of ZEV credits.

Tesla offers satisfactory Momentum, while scoring well on the Growth and Quality metrics, but the stock offers poor Value. For more such insights, sign up for Benzinga Edge Stock Rankings today!

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